Bitcoin ETF Approval Raises Questions on Crypto's Future and Market Impact
Summary:
Following the approval of a Bitcoin exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission, questions have arisen about its impact on the future of Bitcoin and the crypto market. With established asset managers such as BlackRock and Fidelity entering the fray, the ETF represents a mainstream validation of cryptocurrency. However, the subsequent fall in Bitcoin prices has led to discussions over its long-term reputational implications, the potential for mass adoption, and whether retail investors will reenter the market after setbacks during previous crypto winters. Industry insiders argue that the ETF approval is a crucial moment for Bitcoin, driving innovation, adoption, and a broader dialog around its value.
For more than a decade, the cryptocurrency industry has been advocating for Bitcoin (BTC) to be buyable and tradeable on major U.S. stock exchanges. Their wish has finally come true, in the shape of an exchange-traded fund (ETF). However, as soon as the U.S. Securities and Exchange Commission (SEC) approved the crypto ETF, a 10-year ambition, Bitcoin’s price took a downward turn. Some predicted this outcome which could be just a blip, yet it prompts questions around the aftermath.
Does the SEC’s sanction of 11 Bitcoin ETFs on Jan. 10 risk harming Bitcoin’s reputation long-term, or does it simply underline that crypto is now part of the economic mainstream? Can ETFs tempt back customers who lost out in the crypto downturn? Are individual investors prepared to return to Bitcoin after scandals, bankruptcies, and price volatility in recent years?
Supposing heavyweight asset managers like BlackRock and Fidelity launch their Bitcoin ETFs and there’s no uptake? How likely is it that these new ETFs, making their debut on the New York Stock Exchange, the Nasdaq, and the Chicago Board Options Exchange on Jan. 11, will fail to appeal to investors?
Regarding Bitcoin’s reputation, John Nahas, senior vice president of business development at Ava Labs, told Cointelegraph that SEC’s approval would solidify Bitcoin’s standing. He believes that Bitcoin was already mainstream before the approval, however, the latest U.S. ETFs will only strengthen its early adopters and begins to win over remaining sceptics. Bitcoin will no longer be seen as exotic but embraced by conventional finance.
Chris Brodersen, managing director at business advisory and accounting firm EisnerAmper, was more reserved, advising that what really matters is still to come. SEC approval is simply “approval of a non-security commodity”, not an endorsement. However, following approval, there will be an extension in the dialogue around Bitcoin, its foundational technologies, and eventually its value in a mixed portfolio.
The real significance of any increased crypto investment generated by the ETFs is that it may “act as a catalyst for innovation and adoption,” said Brodersen, and posed the question: “How will the crypto ecosystem interrelate with the broader financial ecosystem?”
Shayne Higdon, co-founder and CEO of the HBAR Foundation, expressed a similar point of view, highlighting that the important technology supporting it often gets forgotten as many investors view Bitcoin as digital gold.
Meanwhile, Bitcoin still has a journey to go. “We need mass adoption and price appreciation before Bitcoin can earn this ‘precious commodity’ status, and proper recognition will only come if asset managers, private wealth management advisers, and similar entities back Bitcoin in the coming year,” Higdon said. But can a Bitcoin ETF in a spot market significantly draw in retail investors? Are individual investors prepared to return to crypto following bankruptcies, scandals, and price movements during the so-called crypto winter?
There are reasons to think that last week’s occurrences could make a change on this level. Nahas points out that ETF approval bestows new guarantees and assurance at the governmental and institutional level, explaining that such organisations are established, rooted financial institutions that conduct rigorous due diligence. They would not endorse any asset without a comprehensive screening process and demonstrable demand.
Household names like BlackRock and Fidelity are providing a necessary function for small investors. Cryptocurrencies require a certain level of technical and care-taking knowledge that falls outside the experience of many everyday investors. In general, mass-market consumers aren’t prepared for crypto exchanges or noncustodial wallets, according to Nahas.
As a reaction to the persistent effects of the so-called crypto winter on potential retail investors; “despite fresh challenges relating to volatility caused by scandals and bankruptcies due to the likes of Terra, FTX, and Celsius, there remains considerable interest in the prospect of owning cryptocurrency by retail investors,” Brodersen held.
Published At
1/18/2024 5:01:00 PM
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